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The Birth of a Computing Revolution

Learning from the market's past to understand its present.

This article remembers key events that have shaped Wall Street history.

International Business Machines(NYSE: IBM) first joined the Dow Jones Industrial Average(INDEX: ^DJI) in 1932. It was later removed in 1939, and would not rejoin until 1979. To call this a big mistake would be one of the stock market understatements of the century, as the value of IBM shares would grow by 22,000% from removal to reinstatement. One analyst has estimated that the Dow would have been worth twice its 1979 value had IBM remained part of it continuously.

One of the key events in IBM's market-thrashing transformation into a modern computing pioneer took place on this day in 1958. IBM's 305 RAMAC, the first "supercomputer" with its own 3.75 megabyte internal hard disk drive (also a first), was revealed to the public on Sept. 13, 1958. The IBM 350 disk storage unit contained 50 magnetic disks that could spin at 1,200 revolutions per minute, with an average data retrieval time of 600 milliseconds. It was so large it had to be moved by forklift.

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The 305 RAMAC was rented to businesses in need of real-time accounting for a monthly fee of $3,200, which would amount to approximately $305,000 per year in current dollars. IBM built more than 1,000 of these systems between 1958 and 1961. In 1962, at full utilization, the RAMACs would have contributed only about 1.5% of IBM's total revenue.

The internal hard disk IBM pioneered -- along with the integrated circuit first demonstrated by a Texas Instruments(NYSE: TXN) researcher just a single day earlier in that very same year -- would go on to transform the modern world. Over time, incredible progress would be made in hard disk construction, as you can see in this comparison of a modern Seagate(Nasdaq: STX) Barracuda desktop hard drive to the original IBM 350:

Specification

IBM 350

Seagate Barracuda

Improvement (1958-2011)

Physical Size

60 in. x 68 in. x 29 in.

1 in. x 4 in. x 5.8 in.

See Below

Total Displacement

821.67 cu. feet

23.2 cu. inches

99.98% decrease

Drive Space

3.75 megabytes

3 terabytes

83,885,980% increase

Disk Speed

1,200 rpm

7,200 rpm

500% increase

Data Seek Time

600 milliseconds

9 milliseconds

98.5% decrease

Cost (1 year)*

$38,400

$150

99.6% decrease

Source: IBM and Seagate press releases. *Not adjusted for inflation.

We often talk about the Moore's Law of microprocessors when it comes to the incredible pace of computing improvements, but it's easy to forget just how critical data storage has been as well. Today, five of the Dow's components -- IBM, Microsoft, Intel, Hewlett-Packard, and Cisco Systems(Nasdaq: CSCO) -- have business models built entirely on the expectation of continued exponential computing growth. Of the others, none can rightly claim that their present-day businesses would exist without proper data management, made possible by constant improvements to hardware and software. Our modern world owes IBM a debt of gratitude for the innovation it first revealed on this day 54 years ago.

Some day soon, we might be thanking a new wave of companies for their world-changing creations. They're the driving forces behind 3-D printing, the technology that could transform the way modern manufacturing works. You'll discover the three companies behind the new industrial revolution in the Fool's most popular free report. Click here to find out more.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights.

Author

Alex Planes specializes in the deep analysis of tech, energy, and retail companies, with a particular focus on the ways new or proposed technologies can (and will) shape the future. He is also a dedicated student of financial and business history, often drawing on major events from the past to help readers better understand what's happening today and what might happen tomorrow.